Intergovernmental Agreement on Competition and Productivity-Enhancing Reforms

Intergovernmental Agreement on competition and Productivity-enhancing Reforms

An agreement between
the Commonwealth of Australia and
the States and Territories, being:

New South Wales

Western Australia

Tasmania

the Australian Capital Territory

the Northern Territory

This Agreement implements a new framework for competition and productivityenhancing reforms.

Intergovernmental Agreement on Competition andProductivity-enhancing Reforms

PRELIMINARIES

This Agreement supports the development of reforms to drive Australia’s economic performance and improve living standards. With the decline in the terms of trade from its 2011 peak and downward pressure on workforce participation due to the ageing of the population, Australia must significantly improve its productivity performance if it is to match the growth in living standards enjoyed over the past 30 years.
In signing this Agreement, the Parties acknowledge that sustained coordinated action is necessary to enable the Australian economy to meet the challenges and opportunities of a rapidly changing world.
The Parties agree to prioritise reforms at their discretion to remove unnecessary regulatory barriers to competition; boost innovation to provide better outcomes for individualsin the delivery of human services; promote efficient investment in and use of infrastructure; andadvance otherproductivity-enhancing reforms across the economy.
This Agreement builds on the achievements of previous Council of Australian Governments (COAG) agreements that supported the National Competition Policy and subsequent reforms, including the Competition Principles Agreement and the Conduct Code Agreement. In the event of any inconsistency between this Agreement and the previous agreements, this Agreement takes precedence.

PART 1 - formalities

Parties to this Agreement

This Agreement is between the Commonwealth of Australia (the Commonwealth) and the States and Territories (the States).
Where commitments in this Agreement extend to local government, the States are responsible for their implementation.

Term of the Agreement

This Agreement will commence as soon as the Commonwealth and one other Party sign it and will operate unless the Parties by unanimous agreement in writing revoke it.

PART 2 - OBJECTIVES

The objective of competition andproductivity-enhancing reforms is to improve the well-being of all Australians including by:

ensuring markets workin the long-term interests of all Australians;
improving standards of access, equity and quality;
fostering diversity, choice and responsiveness in government services;
encouraging innovation, entrepreneurship and the entry of new providers of goods and services; and
promoting efficient investment in and use of infrastructure and resources.

Part 3 –competition PRINCIPLES

Subject to the public interest test in clause10 of this Agreement, all levels of government will be guided by the following competition principles:

Competition policies, laws and institutions should promote the longterm interests ofallAustralians.
Regulatory frameworks and government policies binding the public or private sectors should not unnecessarily restrict competition.
When funding, procuring or providing goods or services governments should promote consumer choice and enable informed choices by individuals.
The model for government provision or procurement of goods and services should separate the interests of policy (including funding), regulation and service provision and where practical encourage a diversity of providers.
Governments should separate remaining public monopolies from competitive service elements, and also separate contestable elements into smaller independent business activities.
Government business activities that compete with private providers, whether for-profit or not-for-profit, should comply with competitive neutrality principles to ensure they do not enjoy a net competitive advantage simply as a result of government ownership.
A right to negotiate third-party access to significantinfrastructure should be granted including where it would promote a material increase in competition in dependent markets and would promote the public interest.
Independent authorities should set, administer or oversee prices for natural monopoly infrastructure providers.

The application of these principles is subject to a public interest test, such that regulation or government policy or practices should not restrict competition unless:

the benefits outweigh the costs of the restriction to the community as a whole; and
the objective can only be achieved by restricting competition to that extent.

Different implementation pathways for competition reform may be needed in regional and remote areas in order to ensure the best consumer outcomes.

PART 4 – areas for reform

Areas for competition and productivity-enhancing reforms may include:

Regulatoryreforms– to remove unnecessary regulatory barriers to competition (Appendix A).
Human services reforms– to enable innovative ways to deliver high quality, efficient human services (Appendix B).
Infrastructurereforms– to promote efficient investment in and use of infrastructure in areas such as road transport, water and energy and updated principles for the National Access Regime (Appendix C).
Additional productivityreforms– to grow the economy and improve living standards, which may include reforms identified by the Productivity Commission in its five-yearly reviews into Australia’s productivity performance (Appendix D).

Jurisdictions retain flexibility to develop reforms within and across their priority areas.

Part 5 – financial arrangements

The Commonwealth willprovide payments to the States for the delivery of reformsthat drive Australia’s economic performance and living standards. The Commonwealth and the States will work collaboratively to develop funding agreements in the priority areas at Part 4,in accordance with this Agreement and the Intergovernmental Agreement on Federal Financial Relations.
Jurisdictions may become parties to relevant funding agreements at their discretion. To qualify for payments, the States will deliver reforms consistent with the terms and conditions of this Agreement and the relevant funding agreement. Development of funding agreements in the priority areas at Part 4 will be informed by the appendices to this Agreement. Reforms implemented since the publication of the Competition Policy Review final report on 31 March 2015 will be eligible for consideration under this Part.

PART 6 – institutional arrangements

National Competition Council

The National Competition Council, a research and advisory body established in 1995 by agreement of COAG and formalised under the Competition and Consumer Act 2010, will consult with relevant Parties and provide advice to the Commonwealth Treasurer as necessary, on:
the adequacy of States’ reform proposals and achievement of reforms under related funding agreements, to inform Commonwealth decisions on associated payments; and
the Commonwealth’s achievement of reform commitments under this Agreement.
Where another body is the appropriate body to assess adequacy and achievement of reforms, alternative institutional arrangements may be agreed in relevant funding agreements.

Productivity Commission

Any State may request that the relevant Commonwealth Minister refer studies or inquiries on topics of significance to the Productivity Commission pursuant to the Productivity Commission Act 1998.
The request must be prepared in consultation with all other States.
The Commonwealth Minister will consider the request in determining the Productivity Commission’s work program.
States that have requested a study or inquiry on a topic relevant to their jurisdiction will publish a response to the study within 12 months of the Productivity Commission publishing its final report.

PART 7 – IMPLEMENTATION

Governance

Each Party will be accountable for the delivery of any reforms in their jurisdiction, consistent with existing areas of responsibility.
The Parties agree to work collaboratively to share knowledge, experience and data gained from implementing reforms.
The Council on Federal Financial Relations (CFFR) will oversee the operation of this Agreement and willprovide advice to COAG on any proposed changes to the framework forcompetition andproductivity-enhancing reforms set out in this Agreement.
Where reforms are led by COAG Councils other than CFFR, CFFR will provide advice and support to the relevant council as required. COAG Councils need to comply with the COAG Regulation Impact Statements requirements as set out in the COAG Best Practice Regulation, A Guide for Ministerial Councils and National Standard Setting Bodies, 2007.

Review of the Agreement

CFFR will commission a reviewof this Agreement within 5 years or earlier if agreed by the Parties, and consider any amendments to the Agreement which may be proposed to COAG as a consequence of such a review.

Variation of the Agreement

This Agreement may be amended at any time by agreement in writing of all Parties.
Appendices to this Agreement may be agreed or amended at any time in writing by all the relevant Parties.
A Party to the Agreement may terminate their participation in the Agreement at any time by notifying all the other Parties in writing.

Interpretation and dispute resolution

Any Party may give notice to other Parties of a question of interpretation or dispute under this Agreement.
Officials of relevant Parties will attempt to resolve any question ofinterpretation or dispute in the first instance.
If a question of interpretation or dispute cannot be resolved by officials, it may be referred to the relevant Ministers.

INTERGOVERNMENTAL AGREEMENT

ON COMPETITION AND PRODUCTIVITY-ENHANCING REFORMS

The Parties have confirmed their commitment to this Agreement as follows:

Signed for and on behalf of theCommonwealth of Australia by
______
The Honourable Malcolm Turnbull MP
Prime Minister of the Commonwealth of Australia
9 December 2016
Signed for and on behalf of the
State of New South Wales by
______
The Honourable Mike Baird MP
Premier of the State of New South Wales
9 December 2016 / Signed for and on behalf of the
State of Western Australia by
______
The Honourable Colin Barnett MLA
Premier of the State of WesternAustralia
9 December 2016
Signed for and on behalf of the
State of Tasmania by
______
The Honourable Will Hodgman MP
Premier of the State of Tasmania
9 December 2016 / Signedfor and on behalf of theNorthern Territory by
______
The Honourable Michael Gunner MLA
Chief Minister of the NorthernTerritory of Australia
9 December 2016
Signedfor and on behalf of theAustralian Capital Territory by
______
Mr Andrew Barr MLA
Chief Minister of the AustralianCapitalTerritory
9 December 2016

appendices TO THE INTERGOVERNMENTAL AGREEMENT:

a. regulatory REFORMS

B. Human Services REFORMS

C. infrastructure REFORMS

D. ADDITIONAL productivity REFORMS

schedules TO THE INTERGOVERNMENTAL AGREEMENT

E. National partnerships

APPENDIX a

Regulatory reforms

INTERGOVERNMENTAL AGREEMENT

ON COMPETITION ANDPRODUCTIVITY-ENHANCING REFORMS

All Australian governments should review regulation, including local government regulation, and consider reforms that enhance productivity by removing unnecessary restrictions on competition, subject to the public interest test in clause 10 of the Agreement.
Jurisdictional exemptions for conduct that would normally contravene the competition law (by virtue of subsection 51(1) of the Competition and Consumer Act 2010) should be examined as part of any review process, to ensure they remain necessary and appropriate in their scope. Any further exemptions should be drafted as narrowly as possible to give effect to their policy intent.
Any review process should be transparent, with highest priority areas for review identified in each jurisdiction, and results published along with timetables for reform.
In identifying eligible reforms, the Parties should draw on the following priority regulatory areas,which include, but are not limited to, those identified in the Competition Policy Review:
commercial planning and zoning;
taxis and ride-sharing;
retail trading hours;
pharmacy regulation;
liquor and gambling licensing;
agricultural marketing arrangements;
mandatory product and otherstandards;
occupational and professional licensing;
coastal shipping restrictions;
aviation regulation;
intellectual property;
parallel import restrictions;
media regulation; and
private health insurance.
The Parties should also:
consider productivity reforms to residential land-use planning;
seek to identify and then review other regulatory restrictions on competition not listed above; and
consider any changes necessary to promote competition arising from any reviews of: competitive neutrality; and procurement and other commercial arrangements.

Competitive neutrality

Significant business activities of publicly owned entities should not enjoy any net competitive advantage simply as a result of their public sector ownership.
Accordingly, the Parties affirm their commitment to:
the policy and principles of competitive neutrality established in, and implemented by, the 1995 Competition Principles Agreement; and
apply competitive neutrality principles to government business enterprises engaged in significant business activities in competition with the private sector, established in the 2006 Competition and Infrastructure Reform Agreement.

Review of competitive neutrality policies

Building on these enduring commitments, each Partyshould considertheir competitive neutrality policies to ensure that they continue to fulfil their objective and address any issues raised during any review consultations. Specific matters to be considered should include:

New government businesses: guidelines on the application of competitive neutrality policy during the start‐up stages of government businesses and, in particular,the period of time over which start-up government businesses should earn a commercial rate of return;
Coverage: the appropriate definition of ‘significant business activities’ including the use of threshold tests in such definitions and examining application to other government activities;
Compliance reporting: measures to improve reporting on compliance with competitive neutrality principles including, for example, a requirement that government business enterprises include a statement on compliance in their annual reports; and
Complaints processes: measures to improve the transparency and effectiveness of competitive neutrality complaint processes including, at a minimum, those outlined below under Competitive neutrality complaint processes.

Each Party should share the outcomes of any reviews and actions arising with the other Parties to promote best practice and to increase consistency and transparency between jurisdictions.

Competitive neutrality complaint processes

The Parties should consider the transparency and effectiveness of their competitive neutrality complaint processes including:

assigning responsibility for investigation of complaints to a body or person independent of government;
a requirement for government to respond publicly to the findings of complaint investigations; and
annual public reporting by the independent complaints body or person on the number of complaints received and investigations undertaken.

Government procurement and other commercial arrangements

Governments’ commercial arrangements with the private sector and non-government organisations (such as procurement, commissioning, public private partnerships and privatisation) should be subject to the public interest test set out in Part 3 of this Agreement. Furthermore, such commercial arrangements should, wherever possible, promote choice, innovation and a diversity of providers.
Reflecting this commitment, each Partyshould consider their policies governing commercial arrangements against the public interest test, including policies or guidelines for procurement, commissioning, public private partnerships and privatisation.
Each Party should share the outcomes of any reviews and actions arising with the other Parties to promote best practice.

APPENDIX B

Human services reforms

INTERGOVERNMENTAL AGREEMENT

ON COMPETITION ANDPRODUCTIVITY-ENHANCINGREFORMS

The human services sector plays a vital role in the wellbeing of the Australian population. It covers a diverse range of services, including health, education, justice and community services.
In the domain of human services, it is sufficient that all Australian governments be guided by the following principles, subject to clause 3 of this Appendix:
A better outcome for individuals who use human servicesshould be at the heart of service delivery.
Governments recognise that individuals are generally best placed to make choices about the human services they need. Governments acknowledge that individuals have different capabilities and should be provided with the necessary support and information to make informed decisions.
Improved quality, access, equity and better outcomes are the key objectives, and should be considered against assessments of efficiency and sustainability.
Improved access to information for providers, purchasers and individuals about the cost, efficacy and diversity of human services will enable more informed decision-making.
Productivity-enhancing reform measures should be evidence-based. Governments commissioning human services should do so carefully, with a clear focus on outcomes. There is no presumption in favour of any particular model when developing reforms.
Governments should retain a stewardship function, including consideration of separating the interests of policy (including funding), regulation and service delivery.Service delivery systems should be underpinned by consumer protection arrangements.
Where appropriate, a diversity of providers should be encouraged to offer choice to individuals, while taking care not to crowd out community and volunteer services, especially in thin markets.
Innovation in service provision should be stimulated, while ensuring necessary standards of quality, access and equity for the diverse range of individuals.
Governments should engage with providers and individuals to take an iterative approach to co-designing and improving service provision, with pilots and trials a preferred means of testing different service delivery models.
Governments should design coordinated and integrated service systems so that services are providedsooner, are easier to navigate and better reflect what individuals want and need.
Measurement and evaluation of service outcomes, cost, effectiveness and public benefits should be undertaken in a transparent way to enable individuals and governments to make more informed decisions.
Reforms arising from these principles need not be implemented if:
there is no net benefit in meeting the principles; or
the objective of the regulation, policy or practice can only be achieved by continuing with current practice.
The Parties acknowledge that the Productivity Commission has been tasked with a review into human services, due to report in October 2017, which will inform reforms in this sector.
The Parties acknowledge that some jurisdictions are currently examining aspects of their human services delivery against these principles. The results of these examinations may also inform the future reform directions in the human services sector.

APPENDIX c

Infrastructure reforms

INTERGOVERNMENTAL AGREEMENT

ON COMPETITION ANDPRODUCTIVITY-ENHANCINGREFORMS

Improving the efficiency of investment in and use of infrastructure will help improve Australia’s future productivity performance.
The Parties shouldpromote efficient investment in and use of infrastructure in areas that include, but are not necessarily limited to, road transport, water and energy and agree to updated principles for the National Access Regime.

Road transport

Road transport reforms will promote more efficient investment in and use of roads, ensuring road infrastructure services most efficiently meet the needs of users and are delivered in a transparent and equitable way.
The Parties support the work being done by the COAG Council on Transport and Infrastructure to:
accelerate heavy vehicle road reform,including identifying steps to transition to independent heavy vehicle price regulation by 201718; and
investigate the benefits, costs and options for introducing cost-reflective road pricing for all vehicles.
The Parties agree that the following matters should be developed and considered:

reforms to enable cost‐reflective road pricing;
options to adjust arrangements for indirect taxes and charges as cost-reflective road pricing is introduced;
the links between collection of charges and the reinvestment of revenue into transport services for users;
options for independent oversight of pricing; and
independent institutional arrangements to support road transport reforms.

Given the revenue and expenditure implications of road transport reforms, the Parties agree that CFFRshould provide advice and support to the COAG Council on Transport and Infrastructure as appropriate.

Water